* Portugal bond yield at record high after Moody's downgrade
* Metal prices, Aussie fall after China rate rise
* Euro slips; World stocks end five-day winning streak
* Brent hovers near 32-month high on supply concerns
By Dominic Lau
LONDON, April 5 (Reuters) - Portugal's key bond yield rose
to a euro lifetime high as the country moved closer to a
possible debt bailout, hitting the euro, which fell further from
a five-month high against the dollar after China raised interest
rates.
Metal prices and the Australian dollar, seen as a proxy for
Chinese growth because of its exports of raw materials to the
world's second largest economy, also fell after Beijing hiked
rates for the second time this year to cool stubbornly high
inflation. []
China's tightening also dented Brent crude prices, which
pulled back further from 32-month highs but stayed just above
$120 a barrel as markets focused on fears that unrest in
producer states in Africa and the Middle East could disrupt
supply.
Global stocks snapped a five-day winning streak.
Moody's said it believed Portugal's incoming government
would need to seek financial aid from the European Union as a
matter of urgency. []
"Even though Moody's still rates the sovereign two notches
higher than Standard & Poor's, the downgrade is another blow to
sentiment," said Gavan Nolan, an analyst at data monitor Markit.
There were also reports that Portuguese banks may be
threatening to stop buying government bonds to pressure Lisbon
into seeking a bailout, following the same path as Greece and
Ireland. []
Yields on Portugal's 10-year government bonds <PT10YT=TWEB>
rose to 9.033 percent, while Portuguese stocks <> fell 0.8
percent, underperforming the broader FTSEurofirst 300 index
<>, which was down 0.1 percent.
Credit default swaps implied a 41 percent probability of a
Portugal default within five years, compared with 33 percent at
the end of February, data provider CMA said.
The euro was down 0.4 percent at $1.4162 <EUR=>, off a
five-month high of $1.4268 hit on Monday, while the Australian
dollar <AUD> fell 0.7 percent to $1.0295 and the greenback was
up 0.2 percent against a basket of major currencies <.DXY>.
Investors' assessment whether the single currency can make
fresh gains given that players have already positioned
themselves for interest rate rises in the euro zone during 2011
also put pressure on the euro, which has risen 5.9 percent
against the dollar and 10 percent versus the yen this year.
"There is a lot of good news priced into the euro already
and (ECB President Jean-Claude) Trichet will have to support the
rate view to keep the positive momentum," said Niels
Christensen, currency strategist at Nordea in Copenhagen.
The European Central Bank is widely expected on Thursday to
raise rates by 25 basis points from a record low of 1 percent to
tame inflationary pressures <ECBWATCH>.
<^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^
Graphics on Thursday's ECB meeting:
http://r.reuters.com/kah88r
Graphic on euro zone credit ratings:
http://r.reuters.com/pyh48r
^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>
OIL IMPACT
Federal Reserve Chairman Ben Bernanke said late on Monday
that the recent spike in U.S. inflation was unlikely to persist.
But a sustained higher oil price could pose a serious threat
to the global economic recovery and dampen risk appetite, and
commodity price pressures saw silver <XAG=> rise to a 31-year
high.
"It's interesting that the recent rally in oil has had
virtually no impact on equities. It was just over a month ago
where equities markets were nervous about the impact of oil
prices on the economy," Deutsche Bank strategist Jim Reid said
in a note.
"The difference this time is that the rise has likely been
due to decent growth rather than immediate geopolitical
concerns. Nevertheless one would expect the creeping price of
oil to start to get more attention given the recent rally."
World stocks measured by MSCI All-Country World Index
<.MIWD00000PUS> fell 0.3 percent after hitting six-week highs in
the previous session, while emerging market shares <.MSCIEF> was
flat.
In Asia, Japan's Nikkei average <> lost 1.1 percent
with investors still wary about the long-term impact of last
month's massive earthquake and tsunami and a resulting nuclear
accident that workers are still struggling to contain.
Brent <LCOc1> crude eased after hitting a 32-month high of
$121.29 on Monday as Nigerian election delays and a short-lived
strike in Gabon added to supply jitters for a market already on
edge over fighting in Libya and unrest in Yemen, which borders
top producer Saudi Arabia.
Silver <XAG=> dipped 0.1 percent after touching $38.77 an
ounce, its highest since early 1980, before the Chinese rate
rise, while gold <XAU=> fell 0.3 percent and copper <CMCU3> lost
0.3 percent, down for the third day in a row.
(Additional reporting by Emelia Sithole and Jessica Mortimer
in London, and Alex Richardson in Singapore; editing by Patrick
Graham, John Stonestreet)
